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Use The Globe’s Registered Education Savings Plan tool to help figure out a savings plan for a child in your life, and how to best take advantage of government grants

So you want to open an RESP?

Use The Globe’s Registered Education Savings Plan tool to help figure out a savings plan for a child in your life, and how to best take advantage of government grants

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Congratulations on thinking about saving for a child's education!

A Registered Education Savings Plan (RESP) offers both tax advantages and qualifies you for government education grants. A student can use money from an RESP to pay not just for tuition, but also books, transportation, accommodation and other post-secondary expenses. You can open an RESP for any child, as long as you have the appropriate documents.

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Think ahead to the future

You have around until the beneficiary starts their post-secondary education.

Where do you think they might go to school? While we’re sticking to Canadian provinces and territories, RESPs can be put towards international schooling as well.

Another tough question: how much do you want to budget for room, board and other non-tuition expenses?

We know these things are hard to predict, so here’s some context:

  • in , at schools with room and meal plan packages, they ranged from an average of on the low end to on the high end in 2019/2020, according to Statistics Canada
  • technology, transportation, books and course materials cost an average of $3,400 total in 2015, according to RBC Wealth Management
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How much can you save?

Many factors determine how much to contribute to an RESP, including your available income, what other savings are available and how long until the student begins school. Keep in mind the average cost in for a year of undergraduate tuition was in 2021/2022, according to Statistics Canada.

While everyone's circumstances are different, there's a clear advantage in starting to save early. Here's one example: if you open an RESP in the first year of a child’s life, you’ll need to contribute $2,500 a year (about $208 per month) for 14 years to get the most possible from the Canadian Education Savings Grant (CESG) as quickly as possible. You would then need to contribute at least $1,000 in the 15th year to get the maximum $7,200 in CESG. If you wait until the child is 11, you’ll have to save $5,000 a year for seven years to get $7,000 in grants.

  • The Canadian Education Savings Grant (CESG) program matches 20 per cent of the first $2,500 contributed each year. That means a maximum grant of $500 each year. These are available from the year the child is born until the year they turn 17. The total basic CESG amount available is $7,200.
  • If you start contributing late or don't contribute enough to get the full CESG some years, grant room carries over. But you can't catch up all at once. The maximum CESG per year is $1,000.
  • There is no maximum monthly or yearly RESP contribution. But the lifetime limit is $50,000 per beneficiary.
  • All of this means that if you were to contribute the same amount each month for , the maximum monthly amount would be about .
  • There are additional grants and programs available in some provinces and federally based on income level.
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What interest and return do you expect?

RESPs can contain many different types of investments, including stocks, bonds, Guaranteed Investment Certificates and more. Your rate of return will depend on your investments, but if you're not sure, we suggest entering between 2 and 10 per cent.

You also have to consider how inflation will change costs between now and when the beneficiary starts school. Enter your best guess at the average annual inflation rate between now and then. If you're not sure, we suggest entering between 1 and 6 per cent.

Putting it all together

Your estimated cost for four years of tuition and additional expenses was if the recipient started school today. But accounting for your estimated rate of inflation, the estimated cost in the future becomes .

Based on saving , you will receive in basic CESG grants. At a rate of return of , your contributions and government grants will be worth roughly in .

Note: The estimates presented here are not financial advice. This interactive, which is meant to help demonstrate how RESPs work, makes some assumptions, including about income level and interest.

Still have questions?

Read our RESP explainer

Or send a question to audience@globeandmail.com

Design and development by Carys Mills

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